Want to Buy a Condo? Read this First, More Fannie Increases!

Are you thinking of buying a condo in a newly constructed building? Plan to get an FHA loan for the purchase? If so, you should beware that Fannie Mae has tightened credit for buyers of condominiums. You may recall from earlier posts that Fannie Mae is one of the largest players in the secondary mortgage market, the other is Freddie Mac. Especially hard hit by the new rules are the condo buildings that are newly constructed.

Effective as of March 1, Fannie Mae:

Will not guarantee mortgages in condo buildings where fewer than 70% of the units have sold (up from the previous number of 50%

Will not back loans for sales in buildings where there are 15% of current owners delinquent on Homeowner Assessment fees

Will not back loans where more than 10% of units in the building are owned by a single entity (generally the developer)

Starting in April, buyers without at least a 25% down payment will have to an additional fee at closing equal to 0.75% of their loan regardless of their credit score. As of this writing, Freddie has not followed along with the increases….yet!